You can accept credit cards through payment apps, online invoicing platforms, and point-of-sale systems that don't require a traditional merchant account

A merchant account is a bank account that lets you accept credit and debit cards directly. For decades, it was the only way to take card payments. Today, you have faster alternatives that skip the merchant account entirely and deposit money into your regular business or personal bank account instead.

These alternatives work by routing your card payments through a third-party processor — companies like Square, PayPal, Stripe, or Toast. The processor handles the card data, fraud checks, and settlement. You pay a fee per transaction (usually 2% to 3% plus a small flat fee) instead of monthly account fees and setup costs. For small businesses, one-person operations, and side work, this is often cheaper and faster than a merchant account.

Key Takeaways

  • Payment apps like Square Cash, PayPal, and Venmo let you take card payments on your phone with no setup fees or merchant account.
  • Online invoicing platforms such as Square Invoices, FreshBooks, and Wave let customers pay invoices by card directly from their email.
  • Point-of-sale systems like Toast and Clover process cards in person and online, with fees ranging from 2.6% to 3.5% per transaction.
  • Each option deposits money into your regular bank account within one to three business days, not a separate merchant account.
  • You will need a business tax ID or Social Security number, and the processor will report your income to the IRS on a Form 1099-K.

Payment apps for in-person and remote payments

Payment apps are the fastest way to start. You download an app, link your bank account, and begin taking payments within minutes. There is no approval process, no merchant account, and no monthly fees — you pay only when you process a card.

Square Cash for Business and PayPal Here are the two most common. Square Cash lets you take payments on your phone or tablet using a small card reader (about $10 to $30 one-time cost) or by typing in the card number manually. PayPal Here works the same way. Both charge around 2.75% plus 15 cents per transaction for in-person card-reader payments, and 3.5% plus 30 cents for manually entered cards. Money lands in your bank account within one to two business days.

Venmo for Business is free to send and receive money between people, but does not process credit cards the way Square and PayPal do — it works best for splitting bills and peer-to-peer transfers, not for selling goods or services.

Payment apps work well if you are a freelancer, contractor, or small-service provider who takes a handful of payments per week. If you process hundreds of transactions monthly, the per-transaction fees add up faster than a merchant account would cost.

Online invoicing platforms that accept card payments

If you bill clients for work — consulting, design, writing, repairs — an invoicing platform lets customers pay your invoice by card directly from their email. You create the invoice in the platform, send it, and the customer clicks a payment button. The platform processes the card and deposits the money into your bank account.

Square Invoices is free to use and charges 2.9% plus 30 cents per card payment. FreshBooks starts at about $15 per month and charges 2.2% plus 30 cents per card payment. Wave is free and charges 2.9% plus 30 cents. All three let you create professional-looking invoices, set payment terms, send reminders, and track what clients have paid.

These platforms work best if you send invoices regularly and want customers to pay without calling you or mailing a check. The card fees are built into the invoice, so the customer sees the total cost upfront. You do not need a merchant account — the platform handles all the card processing.

Point-of-sale systems for retail and restaurants

If you run a physical location — a retail shop, food truck, salon, or restaurant — a point-of-sale (POS) system processes cards in person and online. These are more complex than payment apps because they track inventory, staff, and sales history, not just payments.

Toast, Clover, Square for Retail, and Lightspeed are common choices. They charge between 2.6% and 3.5% per card transaction, plus a monthly software fee (usually $50 to $300 depending on features). You buy or lease a card reader and tablet or register. Money deposits into your bank account within one to three business days.

POS systems do not require a merchant account either — the processor handles card acceptance. The main difference from payment apps is that POS systems are built for high transaction volume and inventory management. If you are just starting out or process fewer than 20 transactions per day, a payment app is usually cheaper.

What information you need to get your free guide

All payment processors ask for the same basic information before you can take your first payment. You will need a Social Security number (if you are a sole proprietor) or Employer Identification Number (EIN) (if you have a business entity like an LLC or corporation). You will also need a valid bank account in your name or your business name, and a government-issued ID.

Some processors ask for your business address, phone number, and a brief description of what you sell. A few ask how much you expect to process per month. This information helps them assess fraud risk, but it does not usually delay approval. Most payment apps approve you within minutes. POS systems and invoicing platforms may take a few hours to a few days.

Keep in mind that all card processors report your income to the IRS on a Form 1099-K if you process more than a certain threshold (usually $5,000 per year, though this varies by processor and may change). This is the same tax reporting that a merchant account would trigger. You are responsible for reporting this income on your tax return.

How fees compare to a traditional merchant account

A traditional merchant account typically costs $25 to $100 per month in account fees, plus setup fees of $100 to $500, plus per-transaction fees of 1.5% to 2.5%. You also need a separate bank account and a payment gateway (another $10 to $30 per month). The approval process takes one to two weeks.

Payment apps and invoicing platforms have no monthly fees and no setup costs. You pay only when you process a card: usually 2.75% to 3.5% plus 15 to 30 cents per transaction. If you process $1,000 per month, you pay roughly $27 to $35 in fees. With a merchant account, you would pay $25 to $100 in monthly fees alone, plus transaction fees.

The break-even point depends on your volume. If you process less than $5,000 per month, a payment app is almost always cheaper. Above $10,000 per month, a merchant account may save you money. Between $5,000 and $10,000, compare the numbers for your specific processor and account type.

Security and fraud protection without a merchant account

Payment processors are required by law to meet the same security standards as banks. They use encryption to protect card data, tokenization to avoid storing full card numbers, and fraud detection to catch suspicious transactions. Your customers' card information never touches your phone, computer, or files — the processor handles it.

This is actually safer than a traditional merchant account, because you have less responsibility for protecting card data. You do not store card numbers, expiration dates, or security codes. The processor does, and they are liable if a breach happens on their end.

All major processors offer fraud protection and dispute resolution. If a customer claims they did not authorize a charge, the processor investigates and either refunds the customer or sides with you. Read the processor's dispute policy before you start — some offer stronger buyer protection than others.

Frequently Asked Questions

Do I need a business license to accept card payments?

No, but you do need a Social Security number or EIN. Payment processors ask for this to report your income to the IRS, not because you need a license. Whether you need a business license depends on your location and what you sell — that is a separate question for your city or county.

What happens if a customer disputes a charge?

The processor investigates the dispute. If the customer has a valid claim (they did not authorize the charge, or you did not deliver what you promised), you usually lose the money and the processor refunds the customer. If you can prove you delivered the service or product, you can submit evidence and the processor may side with you. Keep receipts, invoices, and delivery confirmations.

Can I accept payments without a card reader or internet connection?

You can manually enter card numbers into most payment apps, but this is slower and the fees are higher (usually 3.5% instead of 2.75%). You need internet to process the payment — the app cannot work offline. Some POS systems let you process payments offline and sync them later, but this is less common in payment apps.

Will I get a 1099-K if I process a small amount?

Most processors send a 1099-K if you process more than $5,000 in a calendar year, but this threshold varies. Some processors have lower thresholds, and the IRS rules may change. You are responsible for reporting all income on your tax return regardless of whether you receive a 1099-K, so keep your own records.

Can I use a personal bank account instead of a business account?

Yes, most payment processors let you link a personal account. However, if you are running a business, a separate business account makes tax time easier and looks more professional to customers. Many banks offer free or low-cost business checking accounts.